Hudson's Bay To Buy Saks
Acquiring the luxury retailer creates 320 North American stores
By Sam Lewis, associate editor, Integrated Solutions For Retailers
Canada’s largest department store operator — Hudson’s Bay Co.— has agreed to purchase Saks Inc. for $2.4 billion. The acquisition unites Hudson’s Bay, which also operates Lord and Taylor stores, with the famous luxury retailer, Saks, to form 320 North American locations. Of these 320 locations, 179 will be full-line department stores, 72 will be outlet stores, and 69 will be home stores, along with three e-commerce sites. The purchase price will be paid in cash at $16 per share, about 4.5 percent higher than Friday’s closing price of Saks. The complete transaction, including assumption of debt, is valued at $2.9 billion.
Hudson’s Bay, founded in 1670 and based out of Toronto, was attracted to the deal for a couple of reasons. In the next three years, they expect to reap cost savings of $97.3 million from the acquisition. The purchase also introduces Canada to not only the luxury retailer’s department stores, but also Saks’ outlets — Off Fifth.
The deal comes several months after Saks began pondering its options of alternative strategies. Goldman Sachs Group Inc. was hired by Saks in May to explore options of mergers, acquisitions, investments, and even a sale. Several parties expressed interest in buying or making a substantial investment in the 90-year-old department store chain, including Kohlberg Kravis Roberts, which proposed a merger between Saks and Dallas-based competitor Neiman Marcus. Under the terms of the agreement between Hudson’s Bay and Saks, Saks has a 40-day go-shop period in which they can seek bids from another buyer. Hudson’s Bay plans to pay for its new acquisition by issuing $1 billion in new stock, taking on $1.8 billion of new loans, and using $400 million of bonds and available cash on hand.
The merger also brings in an evaluation of very expensive real estate to Hudson’s Bay. Saks has locations on Fifth Avenue in New York City and Wilshire Boulevard in Beverly Hills, the fashion capitals of the U.S., while Hudson’s Bay has properties in downtown Toronto, Vancouver, and Canada’s fashion capital, Montreal. Will the merger allow these flagship stores to maintain or even improve their reputation? Or will new branding affect them both? This has yet to be seen, but Hudson’s Bay has formulated a well-thought out plan in acquiring an American staple in luxury retail and will find ways to keep those flagship stores mainstays of success.